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KPPU calls for extra-territorial powers should Indonesia become signatory to TPP

TPP focus more on procedural fairness, cooperation and transparency in relation to enforcement approach

Vietnam requires a more transparent competition policy and must abolish its current practice of exempting state-owned enterprises (SOEs) as a result of the Trans-Pacific Partnership (TPP) agreement, three antitrust lawyers told PaRR.

Last month 12 nations – Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – successfully concluded the TPP after more than five years of negotiations. Though it is classified as a free trade agreement between the participating countries, its significance extends beyond trade issues, and impacts other aspects including competition policy, data protection and intellectual property.

Although the TPP negotiations have formally concluded, the final implementation may take about two to three years as all 12 participating countries have to obtain approval for the signing of the TPP, said Kala Anandarajah, the head of competition, antitrust and trade at Rajah &Tann. The TPP covers 40% of the world economy and has to be ratified by individual lawmakers across the 12 nations.

The TPP participating countries have agreed that SOEs must enter into commercial transactions on the basis of commercial considerations, and no longer enjoy preferential treatment or assistance from state governments in the production or sale of goods and services.

In Vietnam, SOEs are known to sell goods and services at excessive prices and at low quality, as PaRR previously reported. This is partly on account of minimum prices set by the State Pricing Commission working in favor of SOEs. According to media reports, SOEs account for around one-third of Vietnam’s gross domestic product.

The Vietnam Competition Authority (VCA) has been seeking to improve competition law in the country for some time, having made recommendations to align its laws with developed nations. However two antitrust lawyers pointed out that politics prevails, hindering changes from taking place.

Nguyen Anh Tuan, a partner at LNT & Partners, previously told PaRR that one of the reasons for the ineffectiveness of Vietnam’s competition law is that the state plays too significant a role in regulating business activities.

Chong Kin Lim, head of competition with Drew & Napier, said that it is yet not clear whether Vietnam would be required to remove the exemption given to SOEs. The TPP contemplates that certain exemptions may exist where transparent and based on public policy or public interest grounds, he explained.

“The TPP is largely principle based, and much of the focus is on procedural fairness, cooperation and transparency,” Lim said. Such factors are rarely reflected in actual competition laws of a country, but are more related to the enforcement approach of the competition authority, he added.

Meanwhile Indonesia has yet to decide whether or not it will join the TPP Agreement.

In the event that it does become a signatory to the TPP, like Vietnam it too will have to make some changes to its competition law to enable the country to adapt to more open markets. According to Kamser Lumbanradja, commissioner at the Commission for the Supervision of Business Competition (KPPU), Indonesia’s competition law needs to be amended in terms of the definition of undertaking.

As the TPP paves the way for increased international trade, the KPPU needs to have control over merger and acquisition activities taking place overseas that might have detrimental effects on the domestic markets, as well as business undertakings overseas whoseanticompetitive conducts might affect Indonesia, the commissioner explained.

The current law states that the KPPU only has jurisdiction over businesses that are established, located or operate within Indonesia. The KPPU has asked the Indonesian parliament to amend the law, giving it jurisdiction over any undertakings located globally whose business conduct has an anticompetitive effect on the Indonesian economy, Lumbanradja told PaRR.

This amendment is part of many potential changes proposed to Indonesia’s antitrust law, as PaRR previously reported, including an increase on the cap in penalties, imposing a pre-merger notification regime and granting the KPPU dawn raid powers.

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